MGMT344

Which of the following does principal-agent theory highlight as a problem within the chain of corporate governance?

A. There is an imbalance of knowledge in which individuals higher up the chain (investors, boards) know more than those who are lower in the chain (managers, executives).

B. Individuals acting within the chain of governance act both as principals and as agents.

C. Bonus schemes introduced to incentivise desired management performance are prone to gaming.

D. The shareholder model of governance may leave minority shareholders vulnerable.

E. It is very difficult for agents such as senior managers to monitor closely the performance of principals such as the board of directors

Which of the following is an accurate statement about the role and conduct of boards of directors?

A. They may delegate the strategic management process almost entirely to management, or may engage in it actively.

B. The role of executive directors has been advocated more strongly in recent years.

C. Board stability and uniformity are important to ensure consensus at all times.

D. They are typically expected to work closely with management on a day to day basis.

E. Directorships are typically ceremonial in nature, involving minimal responsibilities and long lunches

Which of the following is not (according to the textbook) a potential disadvantage of the 'shareholder model of governance' dominant in stock-market listed companies?

A. Minority shareholders can be vulnerable if there are dominant institutional shareholders with different interests.

B. Managers are free to make better decisions in the company's interest, as they are not subject to conflicting demands from different stakeholder groups.

C. It causes managers to emphasise short-term gains at the expense of long-term projects.

D. If there all shareholders have small holdings as a percentage of the whole, monitoring of the board is diluted.

E. Weak monitoring can allow CEOs to empire-build in ways that do not add value to shareholders.

Which of the following is untrue about the stances firms can take towards social responsibility?

A. Voluntary publication of sustainability measures such as triple bottom line is part of the 'forum for stakeholder interaction' stance.

B. A central idea of the 'enlightened self interest' approach is that responsible strategies ultimately reward shareholders.

C. The laissez-faire stance may be adopted by smaller businesses that lack the resources to do more than minimally comply with regulations.

D. A stance as 'shaper of society' is mostly associated with public sector organisations and social entrepreneurs

E. The laissez-faire stance is ultimately more profitable to owners and shareholders.

MGMT344

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